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A PROJECT REPORT ON WORKING CAPITAL MANAGEMENT IN HCL INFOSYSTEMS LIMITED Submitted to: SRI SAI UNIVERSITY PALAMPUR In the

partial fulfillment of the requirement for the de ree !f Master of Business Administration
(2011-13)

Under the guidance of:MISS NAN"ITA PARMAR ASSISTANT PR!%& !% MANA'EMENT

Submitted by:SAN#EEV $UMAR M(A )rd SEMESTER R!LLN! *++,+-,-)

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Thi. i. to /ertif0 that SAN#EEV $UMAR from M&(&A& ) rd .eme.ter bearin uni1er.it0 roll number 2*++,+-,-) ha. /ompleted hi. .ummer trainin pro3e/t under m0 uidan/e&

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Ac,no-.edgement
Modern or ani4ation. are hi hl0 /omple5 ad d0nami/. .0.tem.& The0 operate under 1er0 turbulent .o/ial e/onomi/ and politi/al en1ironment& The0 are required to re/on/ile .e1eral in/ompatible oal.& 6onfli/tin to e5e/ute role. and di1er ent intere.t the0 are al.o frau ht 7ith the u.e ri.8 and un/ertaintie.9 hen/e ta/tful mana ement of .u/h or ani4ation to plan uide9 /oordination and /ontrol the performan/e of people to a/hie1e oal.& Mana ement ha. to 8eep the or ani4ation 1ibrant mo1in and in oal 7hi/h them.el1e. are /han in it i. therefore a predetermined

equilibrium& It ha. to a/hie1e

problem hi hl0 /omple5 and ti/8li.h& Thi. information 7ill be a..et to the mana er in ma8in effe/ti1e de/i.ion& Thi. re.ear/h i. u.ed to a/quire to anal04e information and to ma8e .u to ho7 mar8etin problem. .hould be .ol1ed& The mar8etin re.ear/h i. the pro/e.. 7hi/h lin8. to indi1idual. throu h information in important part of the /urri/ulum of M(A pro ramme i. pro3e/t ta8en b0 the .tudent. to in.titute under 7hi/h he or .he i. .tud0in 9 after /ompletion of the .e/ond .eme.ter of the pro ramme& The ob3e/ti1e of thi. pro3e/t i. to enable the .tudent. to under.tand the appli/ation of the a/ademi/. in the real life& I am full0 /onfident that thi. pro3e/t report 7ill be e5tremel0 u.eful to the mana ement& :e 7ould al.o li8e to than8 the fa/ult0 member. and the .taff member. of /$0 !nfo systems 0td1 for their 8ind .upport and help durin the pro3e/t& e.tion to mana ement a.

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$ertificate Ac,no-.edgement Sr1 *o1 *ame of $ha6ters

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Introdu/tion Re1ie7 of literature %ormulate h0pothe.i. Re.ear/h methodolo 0 6on/eptual frame7or8 6on/ludin anal0.i. Limitation of the .tud0 Su e.tion and re/ommendation

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Table No. 1.1 1.1 1.1 1.1 1.5 1.# 1.7 1. 1.9 1.10 1.11 1.12 1.13 1.14 1.15

Title of the Table

Page No 07 09-11 2 ),2)+ 34 35 3# 3# 37 37 40 44 49 49 50

About the company profile @i.tor0 of the /ompan0

Working capital cycle Working capital !arrying co"t $a% material Work in progre"" &ini"he' goo' (perating cycle $a% material con"umption !a"h current liability $ecei)able management *ecure' loan" +n"ecure' loan" !ommercial paper

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The pro3e/t underta8en i. on A:!R$IN' 6APITAL MANA'EMENT IN @6L IN%!SYSTEMS LIMITE"B& It de./ribe. about ho7 the /ompan0 mana e. it. 7or8in /apital and the 1ariou. .tep. that are required in the mana ement of 7or8in /apital& 6a.h i. the lifeline of a /ompan0& If thi. lifeline deteriorate.9 .o doe. the /ompan0C. abilit0 to fund operation.9 rein1e.t and meet /apital requirement. and pa0ment.& Under.tandin a /ompan0C. /a.h flo7 health i. e..ential to ma8in in1e.tment de/i.ion.& A ood 7a0 to 3ud e a /ompan0C. /a.h flo7 pro.pe/t. i. to loo8 at it. 7or8in /apital mana ement D:6ME&

:or8in /apital refer. to the /a.h a bu.ine.. require. for da02to2da0 operation. or9 more .pe/ifi/all09 for finan/in the /on1er.ion of ra7 material. into fini.hed ood.9 7hi/h the /ompan0 .ell. for pa0ment& Amon the mo.t important item. of 7or8in /apital are le1el. of in1entor09 a//ount. re/ei1able9 and a//ount. pa0able& Anal0.t. loo8 at the.e item. for .i n. of a /ompan0C. effi/ien/0 and finan/ial .tren th& The 7or8in /apital i. an important 0ard.ti/8 to mea.ure the /ompan0F. operational and finan/ial effi/ien/0& An0 /ompan0 .hould ha1e a ri ht amount of /a.h and line. of /redit for it. bu.ine.. need. at all time.& Thi. pro3e/t de./ribe. ho7 the mana ement of 7or8in /apital ta8e. pla/e at @6L Info.0.tem.&

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/industan $om6uters 0imited9 al.o 8no7n a. /$0 #nter6rise9 i. one of IndiaC.
lar e.t ele/troni/.9 /omputin and information te/hnolo 0 /ompan0& (a.ed in Noida9 near "elhi9 the /ompan0 /ompri.e. t7o publi/l0 li.ted Indian /ompanie.9 @6L Te/hnolo ie. and @6L Info.0.tem.& @6L 7a. founded in +?=* b0 Shi1 Nadar9 A3a0 6houdhar0 and four of their /ollea ue.& @6L 7a. fo/u.ed on addre..in the IT hard7are mar8et in India for the fir.t t7o de/ade. of it. e5i.ten/e 7ith .ome .poradi/ a/ti1it0 in the lobal mar8et& In +?>+9 @6L .eeded a /ompan0 fo/u.ed on addre..in the /omputer trainin indu.tr09 NIIT9 thou h it ha. /urrentl0 di1e.ted it. .ta8e in the /ompan0& In +??+9 @P too8 minorit0 .ta8e in the /ompan0 D-*GE and the /ompan0 7a. 8no7n a. @6L @P for the fi1e 0ear. of the 3oint 1enture& !n

termination of the 3oint 1enture in +??*9 @6L be/ame an enterpri.e 7hi/h /ompri.e. @6L Te/hnolo ie. Dto addre.. the lobal IT .er1i/e. mar8etE and @6L Info.0.tem. Dto addre.. the Indian and APA6 IT hard7are mar8etE& @6L ha. .in/e then operated a. a holdin /ompan0&

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MR Shi1 Nadar %ounder H /hairman9 6E! Vineet Na0ar

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@6L Info.0.tem. i. no fla.h in the Information Te/hnolo 0 pan& %ounded in +?=*9 the firm ha. /limbed into pantheon of IndiaC. /orporate iant. on the .tren th of it. IT produ/t. and

10

.er1i/e.& @6L Info.0.tem. .pe/iali4e. in IT hard7are DP6C. and .er1er.9 a. 7ell a. net7or8in 9 ima in and /ommuni/ation. produ/t.E9 and .0.tem inte ration .er1i/e. .er1in the dome.ti/ Indian mar8et& In addition to it. /on.umer produ/t.9 the /ompan0 pro1ide. /ommer/ial IT produ/t.9 fa/ilitie. mana ement9 net7or8 .er1i/e.9 and IT .e/urit0 .er1i/e. for /lient. in .u/h indu.trie. a. @6L Te/hnolo ie.& @6L Info.0.tem. Ltd9 a li.ted .ub.idiar0 of @6L9 i. an India2ba.ed hard7are and .0.tem. inte rator& It /laim. a pre.en/e in +=, lo/ation. and ),, .er1i/e /entre& It. manufa/turin fa/ilitie. are ba.ed in 6hennai9 Pondi/herr0 and Uttara8hand &It. headquarter. i. in Noida& @6L Peripheral. DA Unit of @6L Info.0.tem. LimitedE %ounded in the 0ear +?>)9 ha. e.tabli.hed it.elf a. a leadin manufa/turer of /omputer peripheral. in India9 en/ompa..in "i.pla0 Produ/t.9 Thin 6lient .olution.9 Information and Intera/ti1e $io.8.& @6L Peripheral. ha. t7o Manufa/turin fa/ilitie.9 one in Pondi/herr0 DEle/troni/.E and the other in 6hennai DMe/hani/alE &The 6ompan0 ha. been a//redited 7ith IS! ?,,+:-,,,9 IS! +;,,+9 TS +*?;? and IS! +);><& o1ernment9 finan/ial .er1i/e.9 and edu/ation& @6L 6orporation o7n. .i nifi/ant .ta8e. in @6L Info.0.tem. Dabout ;;GE and .i.ter /ompan0

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@6L Info.0.tem. Ltd i. one of the pioneer. in the Indian IT mar8et9 7ith it. ori in. in +?=*& %or o1er quarter of a /entur09 7e ha1e de1eloped and implemented .olution. for multiple mar8et .e ment.9 a/ro.. a ran e of te/hnolo ie. in India& :e ha1e been in the forefront in introdu/in ne7 te/hnolo ie. and .olution.& The hi hli ht. of the @6L .a a are .ummari4ed belo7:

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2 %oundation of the 6ompan0 laid 2 Introdu/e. mi/ro/omputer2ba.ed pro rammable /al/ulator. 7ith 7ide a//eptan/e in the ./ientifi/ J edu/ation /ommunit0 2 Laun/h of the fir.t mi/ro/omputer2ba.ed /ommer/ial /omputer 7ith a R!M 2ba.ed (a.i/ interpreter 2 Una1ailabilit0 of pro rammin .8ill. 7ith /u.tomer. re.ult. in @6L de1elopin be.po8e appli/ation. for their /u.tomer. 2 %ormation of %ar Ea.t 6omputer. Ltd&9 a pioneer in the Sin apore IT mar8et9 for SI DS0.tem Inte rationE .olution. 2 @6L laun/he. an a re..i1e ad1erti.ement /ampai n 7ith the theme C e1en a t0pi.t /an operateC to ma8e the u.a e of /omputer. popular in the SME DSmall H Medium Enterpri.e.E .e ment& Thi. propo.ition in1ol1ed menu2ba.ed appli/ation. for the fir.t time9 to in/rea.e ea.e of operation.& The re.pon.e to the ad1erti.ement 7a. phenomenal& 2@6L de1elop. .pe/ial pro ram enerator. to .peed up the de1elopment of appli/ation. 2 Konal offi/e. of ban8. and eneral in.uran/e /ompanie. adopt /omputeri4ation 2 Pur/ha.e .pe/ifi/ation. demand the a1ailabilit0 of R"(MS produ/t. on the .upplied .olution DUnif09 !ra/leE& @6L arran e. for .u/h produ/t. to be ported to it. platform& 2 @6L a..i.t. /u.tomer. to mi rate from flat2file ba.ed .0.tem. to R"(MS 2 @6L enter. into a 3oint 1enture 7ith @e7lett Pa/8ard 2 @P a..i.t. @6L to introdu/e ne7 .er1i/e.: S0.tem. Inte ration9 IT /on.ultin 9 pa/8a ed .upport .er1i/e. D ba.i/ line9 team line E 2 @6L a/quire. and e5e/ute. the fir.t off.hore pro3e/t from I(M Thailand 2 @6L .et. up /ore roup to define .oft7are de1elopment methodolo ie. 2 Start. e5e/ution of Information S0.tem Plannin pro3e/t.

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2 E5e/ution pro3e/t. for 'erman0 and Au.tralia 2 (e in. @elp de.8 .er1i/e. 1<<B 2 Set. up the STP D Soft7are Te/hnolo 0 Par8 E at 6hennai to e5e/ute .oft7are pro3e/t. for international /u.tomer. 2 (e/ome. national inte ration partner for SAP 2 $ol8ata and Noida STP. .et up 2 @6L bu0. ba/8 @P .ta8e in @6L @e7lett Pa/8ard 2 6hennai and 6oimbatore de1elopment fa/ilitie. et IS! ?,,+ /ertifi/ation 2 A/quire. and .et. up full0 o7ned .ub.idiarie. in USA and U$ 2 Set. up full0 o7ned .ub.idiar0 in Au.tralia 2 @6L tie. up 7ith (road1i.ion a. an inte ration partner 2 Set. up full0 o7ned .ub.idiar0 in Au.tralia 2 6hennai and 6oimbatore de1elopment fa/ilitie. et SEI Le1el ; /ertifi/ation 2 (a . A7ard for Top P6 Vendor In India 2 (e/ome. the +.t IT 6ompan0 to be re/ommended for late.t 1er.ion of IS! ?,,+ : -,,, 2 (a . MAITC. A7ard for (u.ine.. E5/ellen/e 2 Rated a. No& + IT 'roup in India 2Laun/hed Pentium IV P6. at belo7 R. ;,9,,, 2I"6 rated @6L Info.0.tem. a. No& + "e.8top P6 6ompan0 of -,,+ 2"e/lared a. Top P6 Vendor b0 "ataque.t 2@6L Info.0.tem. H Sun Mi/ro.0.tem. enter. into a Enterpri.e "i.tribution A reement 2 Reali n. bu.ine..e.9 in/rea.in fo/u. on dome.ti/ IT9 6ommuni/ation. H Ima in produ/t.9 .olution. H related .er1i/e. 2 (e/ame the fir.t 1endor to re i.ter .ale. of <,9,,, P6. in a quarter 2 %ir.t Indian /ompan0 to be numerou. Uno in the /ommer/ial P6 mar8et 2 Enter. into partner.hip 7ith AM" 2 Laun/hed @ome P6 for R. +?9??? 2 +.t to announ/e P6 pri/e /ut in India9 po.t dut0 redu/tion9 offer. E4eebee at R.& +=??, 2 Maintain. No&+ po.ition in the "e.8top P6 .e ment for 0ear -,,) 2 (e/ome. the +.t /ompan0 to /ro.. + la/ unit mile.tone in the Indian "e.8top P6 mar8et 2 Partner. 7ith Union (an8 to ma8e P6. more affordable9 introdu/e. lo7e.t e1er EMI for P6 in India 2 Re i.ter. a mar8et .hare of +)&=G to be/ome No&+ "e.8top P6 /ompan0 for

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0ear -,,; 2 6ro..e. the landmar8 of L + billion in re1enue in 3u.t nine month. 2 Laun/h of @6L P6 for India9 a full0 fun/tional P6 pri/ed at R.&?9??,J2 2 Rated a. the No&+ "e.8top P6 /ompan0 b0 I"6 India 2"ataque.t 2 C(e.t Emplo0er -,,<C 7ith fi1e .tar ratin . b0 I"6 India 2"ataque.t& 2 CThe Mo.t 6u.tomer Re.pon.i1e 6ompan0 -,,<C 2IT @ard7are 6ate or0 b0 The E/onomi/ Time. 2A1a0a 'lobal 6onne/t& 2Top <, fa.te.t ro7in Te/hnolo 0 6ompanie. in IndiaC H CTop <,, fa.te.t 'ro7in Te/hnolo 0 6ompanie. in A.ia Pa/ifi/C b0 C"eloitte H Tou/heC& b0 C"eloitte H Tou/heC 2C=th IETE 26orporate A7ard -,,<C for performan/e e5/ellen/e in the field of 6omputer. H Tele/ommuni/ation S0.tem. b0 IETE& 2India C. CNo&+ 1endorC for .ale. of A) .i4e To.hiba Multi %un/tional "e1i/e. for the 0ear C,; 2C,< b0 I"6& 2To.hiba CSuper A7ard -,,< to7ard. bu.ine.. e5/ellen/e in di.tribution of To.hiba Multifun/tional produ/t.9 2Strate i/ Partner. in E5/ellen/eC A7ard b0 In fo/u. 6orporation for pro3e/tor.& 2CMo.t 1alued (u.ine.. PartnerC A7ard for pro3e/tor. b0 In fo/u. 6orporation in -,,< 2 =<9 ,,,M ma/hine. produ/ed in a .in le month 2 @6L Info.0.tem. in partner.hip 7ith To.hiba e5pand. it. retail pre.en/e in India b0 un1eilin C.hop To.hibaC 2 @6L Info.0.tem. H No8ia announ/e a lon term di.tribution .trate 0 2 @6L the leader in "e.8top. P6. un1eil. IndiaC. fir.t .e ment .pe/ifi/ ran e of noteboo8. brand 2 C@6L Laptop.C 2 I"(I .ele/t. @6L a. SI partner for +,, bran/he. I6T infra.tru/ture rollout 2 @6L Info.0.tem. .ho7/a.e. 6omputer Solution. for the Rural Mar8et. in India 2 @6L Support 7in. the "N 6hannel.2-,,* '!L" A7ard for (e.t After Sale. Ser1i/e on a nation7ide /u.tomer .ati.fa/tion .ur1e0 /ondu/ted b0 I"6 2 @6L Info.0.tem. %ir.t in India to Laun/h the Ne7 'eneration of @i h Performan/e Ser1er Platform. Po7ered b0 Intel "ual 2 6ore Oeon <,,, Pro/e..or 2 @6L %orm. a Strate i/ Partner.hip 7ith APPLE to pro1ide Sale. H Ser1i/e Support for iPod. in India

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Sa.mi &1 D Marti,ainen & -rote in his artic.e


A Re1ie7 of Theoreti/al and Empiri/al (a.i. of %inan/ial Ratio.9 Publi.hed in The %inni.h #ournal of (u.ine.. E/onomi/. ;J?;&A%inan/ial ratio. are 7idel0 u.ed for modelin purpo.e. both b0 pra/titioner. and re.ear/her.& The firm in1ol1e. man0 intere.ted partie.9 li8e the o7ner.9 mana ement9 per.onnel9 /u.tomer.9 .upplier.9 /ompetitor.9 re ulator0 a en/ie.9 and a/ademi/.9 ea/h ha1in their 1ie7. in appl0in finan/ial .tatement anal0.i. in their e1aluation.& Pra/titioner. u.e finan/ial ratio.9 for in.tan/e9 to fore/a.t the future .u//e.. of /ompanie.9 7hile the re.ear/her. Pmain intere.t ha. been to de1elop model. e5ploitin the.e ratio.& Man0 di.tin/t area. of re.ear/h in1ol1in finan/ial ratio. /an be di./erned& @i.tori/all0 one /an ob.er1e .e1eral ma3or theme. in the finan/ial anal0.i. literature& There i. o1erlappin in the ob.er1able theme.9 and the0 do not ne/e..aril0 /oin/ide 7ith 7hat theoreti/all0 mi ht be the be.t founded area.9e5 po.t& The e5i.tin theme. in/lude the fun/tional form of the finan/ial ratio.9 i&e& the proportionalit0 di./u..ion9 di.tributional /hara/teri.ti/. of finan/ial ratio.9 /la..ifi/ation of finan/ial ratio.9 /omparabilit0 of ratio. a/ro.. indu.trie.9 and indu.tr0 effe/t.9 time2.erie. propertie. of indi1idual finan/ial ratio.9 ban8rupt/0 predi/tion model.9 e5plainin DotherE firm /hara/teri.ti/. 7ith finan/ial ratio.9 .to/8 mar8et. and finan/ial ratio.9 fore/a.tin abilit0 of finan/ial anal0.t. 1. finan/ial model.9 E.timation of internal rate of return from finan/ial .tatement.&B

15

Anonymus -rote in the artic.e


A%inan/ial planner. re/ommend de1elopin /apital for .mall and lar e bu.ine..e. to en.ure lon 2term .u//e..& In toda0C. e/onom09 it ta8e. mone0 to ma8e mone0 and it ta8e. ma8in 7i.e /hoi/e. to .ta0 on top& :hether lar e or .mall9 no bu.ine.. /an operate effi/ientl0 7ithout implementin a lon 2term plan to in1e.t monetaril0 in equipment and fa/ilitie. to e5pedite the /orporate mi..ion and in/rea.e profitabilit0& Improper plannin re.ult. in failed enterpri.e. and a lo.. of re.our/e.Q but proprietor.hip. and /orporation. 7hi/h ma8e prudent de/i.ion. about 7hat9 7here9 7hen9 and ho7 mu/h mone0 to allo/ate to ne7 fa/ilitie. or impro1e on e5i.tin one. 7ill ha1e a fi htin /han/e at .ta0in in the bla/8& The /apital ma0 1ar0 bet7een /orporation.9 but the prin/iple remain. /on.tant& The oal. to a..e.. /urrent operatin pro/edure.9 equipment9 per.onnel9 and /apabilitie.Q in1e.ti ate other more /o.t effe/ti1e mean. to in/rea.e produ/ti1it0 and profitabilit0Q and de1i.e an in1e.tment propo.al 7hi/h ma8e. ood /a.e for impro1in or e5pandin fa/ilitie.& 6apital bud et or 1aluation of in1e.tment. a. the name .u e.t. refer. to /apital in1e.tment. that determine the finan/ial 1iabilit0 of a lon 2term pro3e/t& 6apital bud etin i. an i..ue deep enou h and i. part of the /urri/ulum finan/e and finan/ial mana ement 7orld7ide& Thi. te/hnique of determinin the finan/ial 1iabilit0 attra/t. in1e.tor. due to the fa/t that it ta8e. into a//ount the /a.h .tream. o1er the life of the pro3e/t and to e5/lude non2/a.h e5pen.e.9 depre/iation et/& Al.o /a.h flo7. di./ounted pre.ent 1alue of in1e.tor. Prequired rate of return therefore9 ta8in into a//ount the time 1alue of mone0& The e5/eptional qualitie. abo1e the /apital bud et do more than an0 other approa/h to the /riterion of a//eptan/e or re3e/tion of a pro3e/t& In1e.tment apprai.al i. e..ential for the under.tandin of finan/ial mana ement& Plannin pro/e.. in1ol1e. de/i.ion. on /apital .pendin ba.ed on the /on/ept of ma5imi4ation of .hareholder 7ealth& Thi. pro/e.. require.:R Abilit0 to /la..if0 in1e.tment pro3e/t. of a .i nifi/ant order of profitabilit0R Abilit0 to pro1ide a /utoff point be0ond 7hi/h it i. not 7orth further in1e.tmentR /on.i.ten/0 7ith /orporate ob3e/ti1e. In bu.ine.. effe/ti1el0 mana ed thi. i. a fundamental requirement that de/i.ion. .hould be ba.ed on 8no7led e and effi/ien/0& 6ountle.. de/i.ion. on the nature of /apital ha1e to be ta8en b0 mana ement a. the repla/ement of 7orn and ob.olete equipment9 a/qui.ition of fi5ed a..et.9 and e1aluatin propo.al. for .trate i/ in1e.tment&

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In the mana ement of 7or8in /apital9 the firm i. fa/ed 7ith t7o 8e0 prob.ems +& %ir.t9 i1en the le1el of .ale. and the rele1ant /o.t /on.ideration.9 7hat are the optimal amount. of /a.h9 a//ount. re/ei1able and in1entorie. that a firm .hould /hoo.e to maintainS -& Se/ond9 i1en the.e optimal amount.9 7hat i. the mo.t e/onomi/al 7a0 to finan/e the.e 7or8in /apital in1e.tment.S To produ/e the be.t po..ible re.ult.9 firm. .hould 8eep no unprodu/ti1e a..et. and .hould finan/e 7ith the /heape.t a1ailable .our/e. of fund.& :h0S In eneral9 it i. quite ad1anta eou. for the firm to in1e.t in .hort term a..et. and to finan/e .hort2term liabilitie.&

S$5(# 5' &/# S&U"A


&his 6ro)ect is 7ita. to us in a significant -ay1 !t does ha7e some im6ortance for the com6any too1 &hese are as fo..o-s E Thi. pro3e/t 7ill be a learnin de1i/e for the finan/e .tudent& Throu h thi. pro3e/t 7e 7ould .tud0 the 1ariou. method. of the 7or8in mana ement& The pro3e/t 7ill be a learnin of plannin and finan/in 7or8in /apital& The pro3e/t 7ould al.o be an effe/ti1e tool for /redit poli/ie. of the /ompanie.& Thi. 7ill .ho7 different method. of holdin in1entor0 and dealin 7ith /a.h and re/ei1able.& /apital

17

Thi. 7ill .ho7 the liquidit0 po.ition of the /ompan0 and al.o ho7 do the0 maintain a parti/ular liquidit0 po.ition&

5B2#$&!3# 5' &/# S&U"A


The ob3e/ti1e. of thi. pro3e/t 7ere mainl0 to .tud0 the in1entor09 /a.h and re/ei1able at @6L Info.0.tem. Ltd&9 but there are .ome more and the0 are 2 The main purpo.e of our .tud0 i. to render a better under.tandin of The /on/ept A:or8in 6apital Mana ementB& To under.tand the plannin and mana ement of 7or8in /apital at /$0 !nfosystems 0td1 To mea.ure the finan/ial .oundne.. of the /ompan0 b0 anal04in 1ariou. ratio.& To .u /on/ern& e.t 7a0. for better mana ement and /ontrol of 7or8in /apital at the

'5%MU0A&# /A(5&/#S!S

&y6es of /y6othesis
+& Null @0pothe.i. -& Alternati1e @0pothe.i. )& :or8in @0pothe.i.

Null @0pothe.i.

19

There i. no differen/e bet7een M one and M t7o& In 7hi/h h0pothe.i. te.ted for po..ible re3e/tion i. 8no7n a. null h0pothe.i.&

Alternati1e @0pothe.i.
It i. denoted b0 @a& It i. de.irable to formulate .e1eral h0pothe.i. in be innin and then to .ele/t one that e5plain the phenomena&

:or8in @0pothe.i.
It i. h0pothe.i. 7hi/h i. pro1i.ionall0 adopted to e5plain /ertain fa/t. and to uide a re.ear/her in the in1e.ti ation of other& I u.ed null h0pothe.i. for preparin m0 re.ear/h report 7or8in /apital mana ement of @6L Info.0.tem. LT"&

$/A(&#%-C
RESEARCH METHODOLOGY
Thi. pro3e/t require. a detailed under.tandin of the /on/ept T A:or8in 6apital Mana ementB& Therefore9 fir.tl0 7e need to ha1e a /lear idea of 7hat i. 7or8in /apital9 ho7 it i. mana ed in @6L Info.0.tem.9 7hat are the different 7a0. in 7hi/h the finan/in of 7or8in /apital i. done in the /ompan0&

20

The mana ement of 7or8in

/apital in1ol1e. mana in

in1entorie.9 a//ount.

re/ei1able and pa0able and /a.h& Therefore one al.o need. to ha1e a .ound 8no7led e about /a.h mana ement9 in1entor0 mana ement and re/ei1able. mana ement& Then /ome. the finan/in of 7or8in /apital requirement9 i&e& ho7 the 7or8in /apital i. finan/ed9 7hat are the 1ariou. .our/e. throu h 7hi/h it i. done& And9 in the end9 .u e.tion. and re/ommendation. on 7a0. for better mana ement and /ontrol of 7or8in /apital are pro1ided&

"A&A $500#$&!5*
(rimary "ata: The information i. /olle/ted throu h the primar0 .our/e. li8e:2
Tal8in information 7ith the emplo0ee. of the department&

21

'ettin information b0 ob.er1ation. e& & in manufa/turin pro/e..e.& "i./u..ion 7ith the head of the department&

Secondary "ata: The data i. /olle/ted throu h the .e/ondar0 .our/e. li8e:

Annual Report. of the /ompan0& Ma a4ine.9 Report. of the /ompan0& Poli/0 do/ument. of 1ariou. department.& Internet

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$A(!&A0 MA*A #M#*&

$5*$#(&UA0 '%AM#@5%4

22

Introdu/tion Si nifi/an/e of 7or8in /apital mana ement 6la..ifi/ation of 7or8in /apital T0pe. of 7or8in /apital need. %inan/in of 7or8in /apital %a/tor. determinin 7or8in /apital requirement. :or8in /apital /0/le Sour/e. of 7or8in /apital :or8in /apital po.ition In1entor0 mana ement 6a.h mana ement Re/ei1able. mana ement %inan/in /urrent a..et. :or8in /apital H .hort2term finan/in

23

!*&%5"U$&!5* &5 @5%4!*

$A(!&A0

Working Capital is the Life-Blood and Controlling Nerve Center of a business &he -or,ing ca6ita. management 6recise.y refers to management of current assets1 A firmFs -or,ing ca6ita. consists of its in7estment in current assets= -hich inc.ude shortterm assets such as: 6a.h and ban8 balan/e9 In1entorie.9 Re/ei1able. Din/ludin debtor. and bill.E9 Mar8etable .e/uritie.&

:or8in /apital i. /ommonl0 defined a. the differen/e bet7een /urrent a..et. and /urrent liabilitie.&

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$A(!&A0 G $U%%#*& ASS#&S-$U%%#*& 0!AB!0!&!#S

There are t7o ma3or /on/ept. of 7or8in /apital: 'ro.. 7or8in /apital Net 7or8in /apital

24

ross -or,ing ca6ita.:


It refer. to firmC. in1e.tment in /urrent a..et.& 6urrent a..et. are the a..et.9 7hi/h /an be /on1erted into /a.h 7ith in a finan/ial 0ear& The ro.. 7or8in /apital point. to the need of arran in fund. to finan/e /urrent a..et.&

*et -or,ing ca6ita.:


It refer. to the differen/e bet7een /urrent a..et. and /urrent liabilitie.& Net 7or8in /apital /an be po.iti1e or ne ati1e& A po.iti1e net 7or8in /apital 7ill ari.e 7hen /urrent a..et. e5/eed /urrent liabilitie.& And 1i/e21er.a for ne ati1e net 7or8in /apital& Net 7or8in /apital i. a qualitati1e /on/ept& It indi/ate. the liquidit0 po.ition of the firm and .u e.t. the e5tent to 7hi/h 7or8in /apital need. ma0 be finan/ed b0 permanent .our/e. of fund.& Net 7or8in /apital al.o /o1er. the que.tion of 3udi/iou. mi5 of lon 2 term and .hort2term fund. for finan/in /urrent a..et.&

25

Significance 5f @or,ing $a6ita. Management


&he management of -or,ing ca6ita. is im6ortant for se7era. reasons:
%or one thin 9 the /urrent a..et. of a t0pi/al manufa/turin firm a//ount for half of it. total a..et.& %or a di.tribution /ompan09 the0 a//ount for e1en more& :or8in /apital require. /ontinuou. da0 to da0 .uper1i.ion& :or8in /apital ha. the effe/t on /ompan0C. ri.89 return and .hare pri/e.9 There i. an ine1itable relation.hip bet7een .ale. ro7th and the le1el of /urrent a..et.& The tar et .ale. le1el /an be a/hie1ed onl0 if .upported b0 adequate 7or8in /apital9 ineffi/ient 7or8in /apital mana ement ma0 lead to in.ol1en/0 of the firm if it i. not in a po.ition to meet it. liabilitie. and /ommitment.&

2#

$0ASS!'!$A&!5* 5' @5%4!*

$A(!&A0

:or8in /apital /an be /la..ified a. follo7.: !n the ba.i. of time !n the ba.i. of /on/ept

27

&A(#S 5' @5%4!*

$A(!&A0 *##"S

Another important a.pe/t of 7or8in /apital mana ement i. to anal04e the total 7or8in /apital need. of the firm in order to find out the permanent and temporar0 7or8in /apital& :or8in /apital i. required be/au.e of e5i.ten/e of operatin /0/le& The len thier the operatin /0/le9 reater 7ould be the need for 7or8in /apital& The operatin /0/le i. a /ontinuou. pro/e.. and therefore9 the 7or8in /apital i. needed /on.tantl0 and re ularl0& @o7e1er9 the ma nitude and quantum of 7or8in /apital required 7ill not be .ame all the time.9 rather it 7ill flu/tuate&

The need for /urrent a..et. tend. to .hift o1er time& Some of the.e /han e. refle/t permanent /han e. in the firm a. i. the /a.e 7hen the in1entor0 and re/ei1able. in/rea.e. a. the firm ro7. and the .ale. be/ome hi her and hi her& !ther /han e. are .ea.onal9 a. i. the /a.e 7ith in/rea.ed in1entor0 required for a parti/ular fe.ti1al .ea.on& Still other. are random refle/tin the un/ertaint0 a..o/iated 7ith ro7th in .ale. due to firmC. .pe/ifi/ or eneral e/onomi/ fa/tor.&

&he -or,ing ca6ita. needs can be bifurcated as:


Permanent 7or8in /apital Temporar0 7or8in /apital

(ermanent -or,ing ca6ita.:


There i. al7a0. a minimum le1el of 7or8in /apital9 7hi/h i. /ontinuou.l0 required b0 a firm in order to maintain it. a/ti1itie.& E1er0 firm mu.t ha1e a minimum of /a.h9 .to/8 and other /urrent a..et.9 thi. minimum le1el of /urrent a..et.9 7hi/h mu.t be maintained b0 an0 firm all the time.9 i. 8no7n a. permanent 7or8in /apital for that firm& Thi. amount of 7or8in /apital i. /on.tantl0 and re ularl0 required in the .ame 7a0 a. fi5ed a..et. are required& So9 it ma0 al.o be /alled fi5ed 7or8in /apital&

&em6orary -or,ing ca6ita.:


An0 amount o1er and abo1e the permanent le1el of 7or8in /apital i. temporar09

flu/tuatin or 1ariable 7or8in /apital& The po.ition of the required 7or8in /apital i. needed to meet flu/tuation. in demand /on.equent upon /han e. in produ/tion and .ale. a. a re.ult of .ea.onal /han e.&

29

The permanent le1el i. /on.tant 7hile the temporar0 7or8in

/apital i. flu/tuatin

in/rea.in and de/rea.in in a//ordan/e 7ith .ea.onal demand. a. .ho7n in the fi ure& In the /a.e of an e5pandin firm9 the permanent 7or8in /apital line ma0 not be hori4ontal& Thi. i. be/au.e the demand for permanent /urrent a..et. mi ht be in/rea.in de/rea.in E to .upport a ri.in le1el of a/ti1it0& In that /a.e line 7ould be ri.in & Dor

'!*A*$!*

5' @5%4!*

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There are t7o t0pe. of 7or8in /apital requirement. a. di./u..ed abo1e& The0 are: Permanent or %i5ed :or8in 6apital requirement. Temporar0 or Variable :or8in 6apital requirement.

Therefore9 to finan/e either of the.e t7o 7or8in /apital requirement.9 7e ha1e lon 2term a. 7ell a. .hort2term .our/e.&

30

'A$&5%S "#&#%M!*!*

@5%4!*

$A(!&A0 %#HU!%#M#*&S

There are man0 fa/tor. that determine 7or8in /apital need. of an enterpri.e& Some of the.e fa/tor. are e5plained belo7:

*ature or $haracter of Business1


The 7or8in /apital requirement of a firm i. /lo.el0 related to the nature of it. bu.ine..& A .er1i/e firm9 li8e an ele/tri/it0 underta8in or a tran.port /orporation9 7hi/h ha. a .hort operatin /0/le and 7hi/h .ell. predominantl0 on /a.h ba.i.9 ha. a mode.t 7or8in /apital requirement& !h the other hand9 a manufa/turin /on/ern li8e a ma/hine tool. unit9 7hi/h ha. a lon operatin /0/le and 7hi/h .ell. lar el0 on /redit9 ha. a 1er0 .ub.tantial 7or8in /apital requirement& @6L Info.0.tem. /arr0 on a/ti1itie. related to /omputer .0.tem.& Thou h the0 are primaril0 an a..emblin firm the0 al.o ha1e manufa/turin fa/ilitie. in 6hennai and Pondi/herr0& Thi. require. them to 8eep a 1er0 .i4eable amount in 7or8in /apital&

SiIe of BusinessJSca.e of 56erations1


@6L i. the leader in it. .e ment in both /on.umer a. 7ell a. /ommer/ial mar8et .hare& The0 ha1e in/rea.ed their .hare in the /on.umer .e ment notabl0 in the la.t four 0ear.& Thi. the0 ha1e a/hie1ed throu h retail e5pan.ion& The ./ale of operation. and the .i4e it hold. in the Indian IT mar8et ma8e. it a mu.t for them to hold their in1entor0 and /urrent a..et at a hu e le1el&

31

(rice 0e7e. $hanges1


6han e. in the pri/e le1el al.o affe/t the 7or8in /apital requirement.& It 7a. the redu/ed mar in. in the pri/e of the ra7 material. that had prompted them to o for bul8 pur/ha.e. thu. ma8in on addition. to their net /urrent a..et.& The0 mi ht ha1e one for thi. lar e2./ale pro/urement for a1ailin di./ount. and anti/ipatin a ri.e in pri/e.9 7hi/h 7ould ha1e meant that more fund. are required to maintain the .ame /urrent a..et.&

@5%4!*

$A(!&A0 $A$0#

32

The upper portion of the dia ram abo1e .ho7. in a .implified form the /hain of e1ent. in a manufa/turin firm& Ea/h of the bo5e. in the upper part of the dia ram /an be .een a. a tan8 throu h 7hi/h fund. flo7& The.e tan8.9 7hi/h are /on/erned 7ith da02to2da0 a/ti1itie.9 ha1e fund. /on.tantl0 flo7in into and out of them&

The /hain .tart. 7ith the firm bu0in ra7 material. on /redit& In due /our.e thi. .to/8 7ill be u.ed in produ/tion9 7or8 7ill be /arried out on the .to/89 and it 7ill be/ome part of the firmF. 7or82in2pro re..& :or8 7ill /ontinue on the :IP until it e1entuall0 emer e. a. the fini.hed produ/t&

33

A. produ/tion pro re..e.9 labor /o.t. and o1erhead. need ha1e to be met& !f /our.e at .ome .ta e trade /reditor. 7ill need to be paid& :hen the fini.hed ood. are .old on /redit9 debtor. are in/rea.ed& The0 7ill e1entuall0 pa09 .o that /a.h 7ill be in3e/ted into the firm&

Ea/h of the area.2 Sto/8 Dra7 material.9 :IP9 and fini.hed ood.E9 trade debtor.9 /a.h Dpo.iti1e or ne ati1eE and trade /reditor. T /an be 1ie7ed a. tan8. into and from 7hi/h fund. flo7& :or8in /apital i. /learl0 not the onl0 a.pe/t of a bu.ine.. that affe/t. the amount of /a.h& The bu.ine.. 7ill ha1e to ma8e pa0ment. to o1ernment for ta5ation& %i5ed a..et. 7ill be pur/ha.ed and .old Le..or. of fi5ed a..et. 7ill be paid their rent Shareholder. De5i.tin or ne7E ma0 pro1ide ne7 fund. in the form of /a.h Some .hare. ma0 be redeemed for /a.h "i1idend. ma0 be paid Lon 2term loan /reditor. De5i.tin or ne7E ma0 pro1ide loan finan/e9 loan. 7ill need to be repaid from time2to2time9 and Intere.t obli ation. 7ill ha1e to be met b0 the bu.ine..

Unli8e9 mo1ement. in the 7or8in /apital item.9 mo.t of the.e Pnon27or8in /apitalF /a.h tran.a/tion. are not e1er0 da0 e1ent.& Some of them are annual e1ent. De& & ta5 pa0ment.9 lea.e pa0ment.9 di1idend.9 intere.t and9 po..ibl09 fi5ed a..et pur/ha.e. and .ale.E& !ther. De& & ne7 equit0 and loan finan/e and redemption of old equit0 and loan finan/eE 7ould t0pi/all0 be rarer e1ent.&

S5U%$#S 5' @5%4!*

$A(!&A0

34

@6L Info.0.tem. ha. the follo7in .our/e. a1ailable for the fulfillment of it. 7or8in /apital requirement. in order to /arr0 on it. operation. .moothl0: Ban,s: The.e in/lude the follo7in ban8. T State (an8 of India 6anara (an8 @"%6 (an8 Ltd& I6I6I (an8 Ltd& So/iet0 'eneral Standard 6hartered (an8 State (an8 of Patiala State (an8 of Saura.htra $ommercia. (a6ers:

6ommer/ial Paper. ha1e be/ome an important tool for finan/in 7or8in /apital requirement. of a /ompan0& 6ommer/ial Paper i. an un.e/ured promi..or0 note i..ued b0 the /ompan0 to rai.e .hort2term fund.& The bu0er. of the /ommer/ial paper in/lude ban8.9 in.uran/e /ompanie.9 unit tru.t.9 and /ompanie. 7ith .urplu. fund. to in1e.t for a .hort period 7ith minimum ri.8& @6L i..ue. 6ommer/ial Paper. and had ;,,, /ommer/ial paper. in the 0ear -,++&

@5%4!*

$A(!&A0 (5S!&!5*

35

$U%%#*& ASS#& E $U%%#*& 0!AB!0!&A

(A%&!$U0A%S 6URRENT ASSETS 6URRENT LIA(ILITES G 6URRENT ASSETS IN6REASE G6URRENT LIA(ILITES IN6REASE

2012 +-++>, + <+)+?< +<&* =?&)?

2011 +,;>-> < ->*,?) ?)>&-+ )=+&>?

2010 +,,?=, *,*-= -)&>; -?&<=

200< >+<)) ;*=?+ <,&= +=&*

200> <;,?+ )?=?, -,&,? <+&)<

The +*&+-G in/rea.e in Net 6urrent a..et. de.pite of the fa/t that there ha. been an in/rea.e in the 6urrent A..et. b0 -)&>;G and in/rea.e in 6urrent Liabilit0 ha. been b0 -?&<=G o1er that of the pre1iou. 0ear ha. to be attributed to the fa/t that in -,,?9 the /ompan0 .ho7ed .u/h a hi h in/rea.e in 6A9 that it i. .till bein off.et& Thi. i. an indi/ation a. to the e5pandin operation. of the firm& @6L ha. in/rea.ed it. /urrent a..et. in order to meet the in/rea.in .ale.& The firmF. le1el of liquidit0 bein hi h9 7e need a /he/8 on 7hether it affe/t. the return on a..et.& In -,++ there ha. been a rapid e5pan.ion in /urrent a..et. D?)>&-+E 7hi/h ha1e been off .et to an e5tent b0 /urrent liabilitie. D)=+&>?GE& There ha. been a mar inal in/rea.e in /urrent a..et. of -,+- D+<&*GE and in /a.e of liabilitie. there ha. been a .i nifi/ant in/rea.e of =?&)?G

!*3#*&5%A MA*A #M#*&


3#

!n7entories
In1entorie. /on.titute the mo.t important part of the /urrent a..et. of lar e ma3orit0 of /ompanie.& !n an a1era e the in1entorie. are appro5imatel0 *,G of the /urrent a..et. in publi/ limited /ompanie. in India& (e/au.e of the lar e .i4e of in1entorie. maintained b0 the firm.9 a /on.iderable amount of fund. i. /ommitted to them& It i. therefore9 imperati1e to mana e the in1entorie. effi/ientl0 and effe/ti1el0 in order to a1oid unne/e..ar0 in1e.tment&

*ature of !n7entories
In1entorie. are .to/8 of the produ/t of the /ompan0 i. manufa/turin for .ale and /omponent. ma8e up of the produ/t& The 1ariou. form. of the in1entorie. in the manufa/turin /ompanie. are: %a- Materia.: It i. the ba.i/ input that i. /on1erted into the fini.hed produ/t throu h the manufa/turin pro/e..& Ra7 material. are tho.e unit. 7hi/h ha1e been pur/ha.ed and .tored for future produ/tion& @or,-in-6rogress: In1entorie. are .emi2manufa/tured produ/t.& The0 repre.ent produ/t that need more 7or8 the0 be/ome fini.hed produ/t. for .ale& 'inished oods: In1entorie. are tho.e /ompletel0 manufa/tured produ/t. 7hi/h are read0 for .ale& Sto/8. of ra7 material. and 7or82in2pro re.. fa/ilitate produ/tion9 7hile .to/8 of fini.hed ood. i. required for .mooth mar8etin operation.& Thu.9 in1entorie. .er1e a. a lin8 bet7een the produ/tion and /on.umption of ood.&

!n7entory Management &echni?ues


In mana in in1entorie.9 the firmF. ob3e/ti1e .hould be to be in /on.onan/e 7ith the .hareholder 7ealth ma5imi4ation prin/iple& To a/hie1e thi.9 the firm .hould determine the optimum le1el of in1entor0& Effi/ientl0 /ontrolled in1entorie. ma8e the firm fle5ible& Ineffi/ient in1entor0 /ontrol re.ult. in unbalan/ed in1entor0 and infle5ibilit02the firm ma0 .ometime. run out of .to/8 and .ometime. pile up unne/e..ar0 .to/8.&

#conomic 5rder Huantity (#5H): The ma3or problem to be re.ol1ed i. ho7


mu/h the in1entor0 .hould be added 7hen in1entor0 i. repleni.hed& If the firm i. bu0in ra7 material.9 it ha. to de/ide lot. in 7hi/h it ha. to pur/ha.e on

37

repleni.hment& If the firm i. plannin a produ/tion run9 the i..ue i. ho7 mu/h produ/tion to ./hedule& The.e problem. are /alled order quantit0 problem.9 and the ta.8 of the firm i. to determine the optimum or e/onomi/ lot .i4e& "etermine an optimum le1el in1ol1e. t7o t0pe. of /o.t.:2

5rdering $osts: Thi. term i. u.ed in /a.e of ra7 material and in/lude. all
the /o.t of a/quirin ra7 material& The0 in/lude the /o.t. in/urred in the follo7in a/ti1itie.: Requi.ition Pur/ha.e !rderin Tran.portin Re/ei1in In.pe/tin Storin

!rderin /o.t in/rea.e 7ith the number of order. pla/edQ thu. the more frequentl0 in1entor0 i. a/quired9 the hi her the firmF. orderin /o.t.& !n the other hand9 if the firm maintain. lar e in1entor0F. le1el9 there 7ill be fe7 order. pla/ed and orderin /o.t. 7ill be relati1el0 .mall& Thu.9 orderin /o.t. de/rea.e 7ith the in/rea.in .i4e of in1entor0&

$arrying $osts: 6o.t. are in/urred for maintainin a i1en le1el of


in1entor0 are /alled /arr0in /o.t.& The.e in/lude the follo7in a/ti1itie.:

:arehou.in 6o.t @andlin Admini.trati1e /o.t In.uran/e "eterioration and ob.ole./en/e 6arr0in /o.t. are 1ar0in 7ith in1entor0 .i4e& Thi. beha1ior i. /ontrar0 to that of orderin /o.t. 7hi/h de/line 7ith in/rea.e in

in1entor0 .i4e& The e/onomi/ .i4e of in1entor0 7ould thu. depend on trade2off bet7een /arr0in /o.t. and orderin /o.t&

$om6osition Ra7 Material Store. and Spare. %ini.hed 'ood. :or82in2pro re..

2012 *);? )=+) +))=; <?<

2011 ==;? -?>= =-;< =>;

2010 *+-= -*-*<,* >=+

The in/rea.in /omponent of ra7 material. in in1entor0 i. due to the fa/t that the /ompan0 ha. one for bul8 pur/ha.e. and ha. in/rea.ed /on.umption due to a fall in pri/e. and redu/ed mar in. for the 0ear& Another rea.on mi ht be the in/rea.in .ale.9 7hi/h mi ht ha1e indu/ed them to pur/ha.e more in anti/ipation of a further in/rea.e in demand of the produ/t& And the lo7 /ompo.ition of 7or82in2pro re.. i. under.tandable a. be/au.e of the nature of the bu.ine.. firm i. in1ol1ed in& To the que.tion a. to 7hether the in/rea.in /o.t. in in1entor0 are 3u.tified b0 the return. from it the an.7er /ould be found in the @6L retail e5pan.ion& @6L /ater. to the need of the t7o .eparate .e ment.:

aE In.titution. for 7hi/h the0 manufa/ture a ain.t order. and9 bE Retail .e ment of the mar8et& The0 are more into retail than earlier and at pre.ent more than *<, retail outlet. branded 7ith @6L .i n a e. and more are in the pipeline The /ompan0 in order to meet it. ra7 material. requirement. /ould ha1e one for frequent pur/ha.e.9 7hi/h 7ould ha1e re.ulted in le..er /a.h flo7. for the firm rather than the hi h e5penditure in1ol1ed 7hen pro/urin in at bul8& The rea.on 7h0 the firm ha. one for the.e bul8 pur/ha.e. be/au.e of the lo7er mar in. and the di./ount. it a1ailed be/au.e of pro/urin in bul8 quantitie.& A ne ati1e ro7th in :IP /ould be be/au.e: aE The time ta8en to /on1ert ra7 material. to fini.hed ood. i. 1er0 minimal bE Thi. i. al.o due to /apa/it0 bein not utili4ed at the optimum&

39

AB$ System: A(6 .0.tem of in1entor0 8eepin i. follo7ed in the fa/torie.&


Variou. item. are /ate ori4ed into three different le1el. in the order of their importan/e& %or e& & item. .u/h a. memor09 hi h /apa/it0 pro/e..or. and ro0alt0 are pla/ed in the PAF /ate or0& Lar e number of firm. ha. to maintain .e1eral t0pe. of in1entorie.& It i. not de.irable the .ame de ree of /ontrol all the item.& The firm .hould pa0 ma5imum attention to tho.e item. 7ho.e 1alue i. hi he.t& The firm .hould therefore9 /la..if0 in1entorie. to identif0 7hi/h item. .hould re/ei1e the mo.t effort in /ontrollin & The firm .hould be .ele/ti1e in approa/h to /ontrol in1e.tment in 1ariou. t0pe. of in1entorie.& Thi. anal0ti/al approa/h i. /alled AA(6 Anal0.i.B& The hi h21alue item. are /la..ified a. AA item.B and 7ould be under ti hte.t /ontrol& A6 item.B repre.ent relati1el0 lea.t 1alue and 7ould require .imple /ontrol& A ( item.B fall in bet7een the t7o /ate orie. and require rea.onable attention of mana ement&

2!&: The rele1an/e of #IT in @6L Info .0.tem /an be que.tioned& Thi. i. be/au.e
the0 pro/ure material. on the ba.i. of pro3e/tion. made at lea.t t7o or three month. before& E1en at the time of pro/urement the0 en.ure that the0 pro/ure mu/h more than 7hat a/tuall0 i. required b0 the firm that i. the0 hold .i nifi/ant amount of in1entor0 a. .afet0 .to/8& Thi. i. done to /ounter the threat in1ol1ed in default and a//idental brea8do7n.& The le1el. of .afet0 .to/8 u.uall0 1ar0 a//ordin to the u.a e&

$on7ersion (eriods
%a- Materia.

(articu.ars
40

2012

2011

2010

Ra7 Material 6on.umption Ra7 Material 6on.umptionJda0 Ra7 Material In1entor0 Ra7 Material @oldin "a0.

+-+,== ))=,=-+

?=?=+&)+ -*>&;+ *?*,&-=< -<&?)

<===<&+; +<>&-> ;)*;&=)< -=&<=

The ra7 material /on1er.ion period or the ra7 material holdin /o.t ha. redu/ed from -* to -+& Thi. i. de.pite an in/rea.e in it. /on.umption& Thi. indi/ate. that the firm i. able to /on1ert the ra7 material at it. di.po.al to the 7or82in2pro re.. at a le..er time a. /ompared to the la.t 0ear& It 7ould be to the benefit of the firm to redu/e the produ/tion pro/e.. and in/rea.e the /on1er.ion rate .till a. the firm i. required to meet the in/rea.in demand&

@or,-in-6rogress (articu.ars 6o.t of Produ/tion 6o.t of Produ/tionJda0 :or8 in pro re.. in1entor0 :IP @oldin da0. 2012 +?+?++ <-<&=> *>?&< +&)+ 2011 +<?*<+&+? ;)=&; >-=&<+&>? 2010 ++)<,,&)) )+,&?< *=?&;<< -&+?

The 7or82in2pro re.. holdin time i. important for a firm in the .en.e that it determine. the rate of time at 7hi/h the produ/tion pro/e.. 7ill be /omplete or the fini.hed ood. 7ill be read0 for di.po.al b0 the firm& The firm a. it i. in the pro/e.. of a..emblin .hould ta8e the lea.t po..ible time in /on1er.ion to fini.hed ood. unli8e a hard /ore manufa/turin firm9 a. an0 firm 7ould li8e to ha1e it. in1entor0 in the 7or82in2pro re.. at the minimum& There 7ould al.o be le.. of .to/8 out /o.t. a. due to better /on1er.ion rate. the firm i. able to meet the ri.e in demand .ituation.& More the time it .pend. le..er it. effi/ien/0 7ould be in the mar8et& @ere the firm ha. been able to brin do7n it. :IP /on1er.ion period.&

'inished

oods

41

(articu.ars 6o.t of ood. .old 6o.t of ood. .oldJda0 %ini.hed ood. in1entor0 %ini.hed ood. in1entor0 @oldin da0.

2012 -->+== *-< +,)+, +*

2011 +=>;)>&> < ;>>&>= *>=<&=-< +;&,*

2010 +-;=*>&?);+&>)<,-*&<,< +;&>

The time ta8en for the firm to reali4e it. fini.hed ood. a. .ale. ha. in/rea.ed a. /ompared to la.t 0ear& Thi. ro7th in .ale. /ould be tra/ed ba/8 to the ro7in dome.ti/ IT mar8et for the /ommer/ial a. /on.umer .e ment in India& @6L ha. around +<G of the mar8et in de.8top and it i. the mar8et leader in thi. .e ment& So it i. onl0 natural that the0 are able to better their /on1er.ion rate of fini.hed ood. to .ale.&

56erating $yc.e (articu.ars In1entor0 /on1er.ion period A1era e /olle/tion period 'ro.. operatin /0/le A1era e pa0ment period !peratin /0/le 2012 )> =, +,> ->* 2011 ;*) +,< -) >2010 ;< ** +++ += ?;

The operatin /0/le of the firm re1eal. the da0. 7ithin 7hi/h the in1entor0 pro/ured et. /on1erted to .ale. or re1enue for the firm& Thi. time period i. of importan/e to the firm a. a la here /ould .i nifi/antl0 affe/t the profitabilit09 liquidit09 /redit term.9 and the poli/ie. of the firm& All the firm. 7ould li8e to redu/e it to .u/h e5tend that their /a.h inflo7. are timel0 enou h to meet their obli ation. and .upport the operation.& That the firm ha. been able to redu/e the ratio i. in it.elf an a/hie1ement a. the0 7ere ha1in hu e .to/8. of in1entor0& (ut the redu/tion in the /0/le /ould al.o be attributed to the boom in the mar8et

42

and the ro7th it i. e5pe/ted to rea/h& Thi. boom automati/all0 en.ure. the demand for the fini.hed ood. and thu. helpin in it to arner .ale. for the firm&

%a- Materia. $onsum6tion (articu.ars Imported Indi enou. G Import. 2012 ?-,,= -?,=, =<&?? 2011 =,=>;&= -=+>=&, ; =-&-< 2010 ;-+-?&*) +<*;<&<+ =-&?-

A ma3or /hun8 of the import. /ome from $orea and Tai7an and i. pur/ha.ed in USL& The 1alue of imported and indi enou. ra7 material /on.umed i1e a /lear pi/ture that if there i. a /han e in the EOIM poli/0 of the o1ernment it i. bound to affe/t the /ompan0 ad1er.el0 a. more than =,G of their /on.umption i. from import.& (ut thi. i. the ./enario 7itne..ed in the indu.tr0 a. a 7hole and thou h @6L i. into e5pandin it. operation to Uttaran/hal it in the pre.ent .tate i. 7ould be affe/ted b0 a /han e in the import dut0 .tru/ture& A ma3or /hun8 of their /urrent a..et. are in the form of in1entor0 and the /han e in te/hnolo 0 7ill in1ariabl0 be a threat fa/ed b0 the firm& The que.tion of te/hnolo 0 appl0in here li8e .a0. a /ertain de1i/e oin .a0 out of fa.hion or outdated& %or e& & T%T monitor. bein in demand more than 6RT&

$AS/ MA*A #M#*&

S5U%$#S 5' $AS/: Sources of additiona. -or,ing ca6ita. inc.ude the fo..o-ing:
E5i.tin /a.h re.er1e.

43

Profit. D7hen 0ou .e/ure it a. /a.hUE Pa0able. D/redit from .upplier.E Ne7 equit0 or loan. from .hareholder. (an8 o1erdraft. or line. of /redit& Lon 2term loan.

If 0ou ha1e in.uffi/ient 7or8in /apital and tr0 to in/rea.e .ale.9 0ou /an ea.il0 o1er2 .tret/h the finan/ial re.our/e. of the bu.ine..& Thi. i. /alled o1ertradin &

#ar.y -arning signs inc.ude:


Pre..ure on e5i.tin /a.h E5/eptional /a.h eneratin a/ti1itie. e& & offerin hi h di./ount. for earl0 /a.h pa0ment (an8 o1erdraft e5/eed. authori4ed limit& See8in reater o1erdraft. or line. of /redit

Part2pa0in .upplier. or other /reditor. Pa0in bill. in /a.h to .e/ure additional .upplie. Mana ement pre2o//upation 7ith surviving rather than mana in %requent .hort2term emer en/0 reque.t. to the ban8 Dto help pa0 7a e.&E

$AS/ MA*A #M#*& !* /$0 !*'5SAS&#MS: &he cash management system fo..o-ed by the /$0 !nfosystems is main.y .oc, bo8 system1
6a.h Mana ement S0.tem in1ol1e. the follo7in .tep.: +& The bran/h offi/e. of the /ompan0 at 1ariou. lo/ation. hold the /olle/tion of /heque. of the /u.tomer.& -& Tho.e /heque. are either handed o1er to the 6MS a en/ie. or ban8 of the parti/ular lo/ation ta8e /har e of 7hole /olle/tion&

44

)& The.e 6MS a en/ie. or ban8 .end tho.e /heque. to the /learin hou.e to ma8e them reali4ed& The.e /heque. /an be lo/al or out.tation& ;& The 6MS a en/ie. or ban8 .end information to the /entral hub of the /ompan0 re ardin reali4ation /heque boun/ed& <& The /entral hub pa..e. on the reali4ed fund. to the /ompan0 a. per the a reed a reement.& *& The 6MS a en/ie. or /on/erned ban8 pro1ide. the ne/e..ar0 MIS to the /ompan0 a. per requirement& In /a.h mana ement the /olle/t float ta8en for the /heque. to be reali4ed into /a.h i. irrele1ant and non2interferin be/au.e ban8. .u/h a. Standard 6hartered9 @"%6 and 6iti(an8 7ho i1e /redit on the ba.i. of the.e /heque. after /har in a 1er0 .mall amount& The.e /redit. are i1en to immediatel0 and the ma5imum time ta8en mi ht be 3u.t a da0& The amount the0 /har e i. 1er0 lo7 and thi. mi ht /o1er the threat of the /heque .ent in b0 t7o or three /u.tomer. boun/in & E1en other7i.e the time ta8en for the /heque. to be pro/e..ed i. in.tantaneou.& Their 6a.h Mana ement S0.tem i. quite effi/ient&

45

$ash-$urrent 0iabi.ity (articu.ars Ab.olute Liquid Ratio -,+,&-;:+ -,++ ,&)+:+ -,+, ,&++:+

The ab.olute liquid ratio i. the be.t for three 0ear. and the /a.h balan/e. a. to the /urrent liabilit0 ha. impro1ed for the firm& %irm ha. lar e re.our/e. in /a.h and ban8 balan/e.& :hile lar e re.our/e. in /a.h and ban8 balan/e. ma0 .eem to affe/t the re1enue the firm /ould ha1e earned b0 in1e.tin it el.e7here a. maintenan/e of /urrent a..et. a. /a.h and in near /a.h a..et. and mar8etable .e/uritie. ma0 in/rea.e the liquidit0 po.ition but not the re1enue or profit earnin /apa/it0 of the firm&

$ash 7s1 Mar,etab.e Securities


The in1e.tment in mar8etable .e/uritie. rather than ha1in lar e /a.h balan/e. in .omethin that ha. been i1en thou ht for b0 the firm& Thi. i. be/au.e 7hile a firm et. re1enue in the form of intere.t. b0 in1e.tment.9 it a/tuall0 ha. to pa0. /ertain amount mone0 to the ban8. for maintainin /urrent a//ount. and fi5ed depo.it. u.uall0 ha1e a lon er maturit0 period& That i.9 the problem 7ith hi h in1e.tment. i. that the opportunit0 to earn i. lo.t9 thu. a firm ha. to maintain an optimal /a.h balan/e& (ut the in1e.tment in mutual fund. or other mar8etable .e/uritie. mi ht /reate a problem of in1e.tment9 a. the0 mi ht not be readil0 reali4able a. .a0 liquid /a.h or the amount depo.ited in the /urrent a//ount& The in1e.tment. in .a0 fi5ed a..et. .a0 ma0 earn a fi5ed rate of intere.t but the0 ha1e a maturit0 period atta/hed to them& In @6L9 Standard 6hartered i. the /on/entration ban8 in 7hi/h all the inflo7. from the depo.it ban8. are /on/entrated and pa..ed on to the di.bur.ement ban8. for further di.bur.ement&

4#

0i?uid $ash Ba.ance


The liquid /a.h maintained in the bu.ine.. i. onl0 that mu/h a. i. required to .ati.f0 the dail0 requirement. of the firm and not more& The re.t of the /a.h i. in1e.ted into mutual fund. and al.o held in fi5ed depo.it. and /urrent a//ount.&

!nstruments Used
The in.trument u.ed here are primaril0 /heque. /ompri.in of around ?=G of 7hat i. u.ed in& The re.t -2)G /ompri.e of the letter. of /redit& Thu. 7or8in /apital i. the lifeline for e1er0 bu.ine..& The main ad1anta e. of .uffi/ient 7or8in /apital are: It help. in prompt pa0ment En.ure. hi h .ol1en/0 in the /ompan0 and ood /redit .tandin & Re ular .uppl0 of material and /ontinuou. produ/tion& En.ure. re ular pa0ment of .alarie. and 7a e. and da0 to da0 /ommitment.&

47

%#$#!3AB0#S MA*A #M#*&


6a.h flo7 /an be .i nifi/antl0 enhan/ed if the amount. o7in to a bu.ine.. are /olle/ted fa.ter& E1er0 bu.ine.. need. to 8no7&&&& 7ho o7e. them mone0&&&& ho7 mu/h i. o7ed&&&& ho7 lon it i. o7in &&&& for 7hat it i. o7ed&

0ate 6ayments erode 6rofits and can .ead to bad debts1


Slo7 pa0ment ha. a /ripplin effe/t on bu.ine..Q in parti/ular on .mall bu.ine..e. 7hom /an lea.t afford it& If 0ou donCt mana e debtor.9 the0 7ill be in to mana e 0our bu.ine.. a. 0ou 7ill raduall0 lo.e /ontrol due to redu/ed /a.h flo7 and9 of /our.e9 0ou /ould e5perien/e an in/rea.ed in/iden/e of bad debt&

&he fo..o-ing measures -i.. he.6 manage your debtors:


+& @a1e the ri ht mental attitude to the /ontrol of /redit and ma8e .ure that it et. the priorit0 it de.er1e.& -& E.tabli.h /lear /redit pra/ti/e. a. a matter of /ompan0 poli/0& )& Ma8e .ure that the.e pra/ti/e. are /learl0 under.tood b0 .taff9 .upplier. and /u.tomer.& ;& (e profe..ional 7hen a//eptin ne7 a//ount.9 and e.pe/iall0 lar er one.& <& 6he/8 out ea/h /u.tomer thorou hl0 before 0ou offer /redit& U.e /redit a en/ie.9 ban8 referen/e.9 indu.tr0 .our/e. et/& *& E.tabli.h /redit limit. for ea/h /u.tomer and .ti/8 to them& =& 6ontinuou.l0 re1ie7 the.e limit. 7hen 0ou .u.pe/t tou h time. are /omin or if

operatin in a 1olatile .e/tor& >& $eep 1er0 /lo.e to 0our lar er /u.tomer.& ?& In1oi/e promptl0 and /learl0& +,&6on.ider /har in penaltie. on o1erdue a//ount.& ++&6on.ider a//eptin /redit Jdebit /ard. a. a pa0ment option& +-&Monitor 0our debtor balan/e. and a in ./hedule.9 and donCt let an0 debt. et too old&

Re/o ni4e that the lon er .omeone o7e. 0ou9 the reater the /han/e 0ou 7ill ne1er et paid& If the a1era e a e of 0our debtor. i. ettin lon er9 or i. alread0 1er0 lon 9 0ou ma0 need to loo8 for the follo7in po..ible defe/t.& Poor /olle/tion pro/edure.& La5 enfor/ement of /redit term.& Slo7 i..ue of in1oi/e. or .tatement.& Error. in in1oi/e. or .tatement.& 6u.tomer di..ati.fa/tion& :ea8 /redit 3ud ment&

"ebtor. due o1er ?, da0. Dunle.. 7ithin a reed /redit term.E .hould enerall0 demand immediate attention& Loo8 for the 7arnin .i n. of a future bad debt& %or e5ampleV&& +& Lon er /redit term. ta8en 7ith appro1al9 parti/ularl0 for .maller order.& -& U.e of po.t2dated /he/8. b0 debtor. 7ho normall0 .ettle 7ithin a reed term.& )& E1iden/e of /u.tomer. .7it/hin to additional .upplier. for the .ame ood.& ;& Ne7 /u.tomer. 7ho are relu/tant to i1e /redit referen/e.& <& Re/ei1in part pa0ment. from debtor.&

49

(rofits on.y come from 6aid sa.es1


The a/t of /olle/tin mone0 i. one9 7hi/h mo.t people di.li8e for man0 rea.on. and therefore put on the lon fin er be/au.e the0 /on1in/e them.el1e. that there i. .omethin more ur ent or important that demand their attention no7& There i. nothin more important than ettin paid for 0our produ/t or .er1i/e& A /u.tomer 7ho doe. not pa0 i. not a /u.tomer&

HERE ARE

EW WA!" #N C$LLEC%#N& '$NE!

R$' (EB%$R")

"e1elop appropriate pro/edure. for handlin late pa0ment.& Tra/8 and pur.ue late pa0er. 'et e5ternal help if 0ou o7n effort. fail& "onFt feel uilt0 a.8in for mone0 it. 0our. and 0ou are entitled to it& Ma8e that /all no7& And 8eep a.8in until 0ou et .ome .ati.fa/tion& In diffi/ult /ir/um.tan/e.9 ta8e 7hat 0ou /an no7 and a ree term. for the remainder9 it le..en. the problem& :hen a.8in for 0our mone09 be hard on the i..ue T but .oft on the per.on& "onFt i1e the debtor an0 e5/u.e. for not pa0in & Ma8e that 0our ob3e/ti1e i. to et the mone09 not to ./ore point. or et e1en&

%#$#!3AB0#S MA*A #M#*& !* /$0 !*'5SAS&#MS


PARTI6ULARS "E(T!RS TURN!VER RATI! AVERA'E 6!LLE6TI!N PERI!" -,+<&-+ =, -,++ <&>, *) -,+, <&<) ** -,,? *&*<<

50

A better turno1er ratio implie. for the firm9 more effi/ien/0 in /on1ertin the a//ount. re/ei1able to /a.h& A firm 7ith 1er0 hi h turno1er ratio /an ta8e the freedom of holdin 1er0 little balan/e. in /a.h9 a. their debtor. are ea.il0 reali4able& In /a.e of @6L9 the /olle/tion period for the firm i. =, da0.&

$500#$&!5* (50!$!#S:
It refer. to the /olle/tion pro/edure. .u/h a. letter.9 phone /all. and other follo7 up me/hani.m to re/o1er the amount due from the /u.tomer.& It i. ob1iou. that /o.t. are in/urred to7ard. the /olle/tion effort.9 but bad debt. a. 7ell a. a1era e /olle/tion period 7ould de/rea.e& %urther9 a .tri/t /olle/tion poli/0 of the firm i. e5pen.i1e for the firm be/au.e of the hi h /o.t i. required to be in/urred b0 the firm and it ma0 al.o re.ult in lo.. of ood7ill& (ut at the .ame time it minimi4e. the lo.. on a//ount of bad debt.& Therefore9 a firm ha. to .tri8e a balan/e bet7een the /o.t and benefit. a..o/iated 7ith /olle/tion poli/ie.& The .tep. u.uall0 follo7ed in /olle/tion effort. are: Sendin repeated letter. and reminder. to the /u.tomer. Per.onal 1i.it. U.in a en/ie. in1ol1ed in /olle/tion pro/e.. Ma8in telephoni/ reminder. Initiatin le al a/tion. Real Time 'ro.. Settlement DRT'SE

Real Time 'ro.. Settlement a. .u/h i. a /on/ept ne7 in nature and thou h the firm u.e. the .0.tem 7ith all the member. of the /on.ortium9 it i. .till in it. primal .ta e and 7ill ta8e time before all of the /lient. of the firm are 7illin to a//ept it& The firm ha. made a propo.al to the /on.ortium of the ban8. durin apprai.al for fa.ter implementation of internet ba.ed ban8in fa/ilit0 b0 all the ban8. and adoption of RT'S pa0ment .0.tem throu h net& The debtorF. turno1er ratio i. /ompletel0 dependent upon the /redit poli/0 follo7ed b0 the firm& The /redit poli/0 follo7ed b0 the firm .hould be .u/h that the threat of bad debt. and the default rate in1ol1ed .hould be terminated&

51

PARTI6ULARS 6RE"IT!RS TURN!VER RATI! PAYMENT PERI!"

-,+1B1CC 22

-,++ 1:1B> 23

-,+, 2112< 1;

-,,? 2111C 1B

That the /reditor. turno1er ratio ha. de/lined and pa0ment period ha. in/rea.ed indi/ate that the /ompan0 ha. ot a lee7a0 in ma8in the pa0ment to the /reditor. b0 7a0 of in/rea.ed time& :ith /reditor. the0 are ha1in pre2a reement. and ha1e underta8en arran ement. 7ith them9 7hi/h the0 belie1e to be the be.t in the bu.ine.. and the.e are fi5ed& DN!TE: A//eptan/e. are not in/luded in the /omputation of /reditor. turno1erE

'inancing $urrent Assets


The firm ha. to de/ide about the .our/e. of fund.9 7hi/h /an be a1ailed to ma8e in1e.tment in /urrent a..et.&

0ong term financing:


It in/lude. ordinar0 .hare /apital9 preferen/e .hare /apital9 debenture.9 lon term borro7in . from finan/ial in.titution. and re.er1e. and .urplu.&

Short term financing:


It i. for a period le.. than one 0ear and in/lude. 7or8in /apital fund. from ban8.9 publi/ depo.it.9 /ommer/ial paper et/&

S6ontaneous financing:

52

It refer. to automati/ .our/e. of .hort2term fund. ari.in in normal /our.e of bu.ine..& There i. no e5pli/it /o.t a..o/iated 7ith it& %or e5ample9 Trade 6redit and !ut.tandin E5pen.e. et/&

"e6ending on the mi8 of short and .ong term financing= the com6any can fo..o- any of the fo..o-ing a66roaches1

Matching A66roach
In thi.9 the firm follo7. a finan/ial plan9 7hi/h mat/he. the e5pe/ted life of a..et. 7ith the e5pe/ted life of .our/e of fund. rai.ed to finan/e a..et.& :hen the firm follo7. thi. approa/h9 lon term finan/in 7ill be u.ed to finan/e fi5ed a..et. and permanent /urrent a..et. and .hort term finan/in to finan/e temporar0 or 1ariable /urrent a..et.&

$onser7ati7e A66roach
In thi.9 the firm finan/e. it. permanent a..et. and al.o a part of temporar0 /urrent a..et. 7ith lon term finan/in & In the period. 7hen the firm ha. no need for temporar0 /urrent a..et.9 the lon 2term fund. /an be in1e.ted in tradable .e/uritie. to /on.er1e liquidit0& In thi. the firm ha. le.. ri.8 of fa/in the problem of .horta e of fund.&

Aggressi7e A66roach
In thi.9 the firm u.e. more .hort term finan/in than 7arranted b0 the mat/hin plan& Under an a re..i1e plan9 the firm finan/e. a part of it. /urrent a..et. 7ith .hort term finan/in & Relati1el0 more u.e of .hort term finan/in ma8e. the firm more ri.80&

$urrent asset to fi8ed asset ratio:

53

The finan/ial mana er .hould determine the optimum le1el of /urrent a..et. .o that the 7ealth of .hareholder. i. ma5imi4ed& A firm need. fi5ed and /urrent a..et. to .upport a parti/ular le1el of output& The le1el of /urrent a..et. /an be mea.ured b0 relatin /urrent a..et.& "i1idin /urrent a..et. b0 fi5ed a..et. i1e. 6AJ%A ratio& A..umin a /on.tant le1el of fi5ed a..et.9 a hi her 6AJ%A ratio indi/ate. a /on.er1ati1e /urrent a..et. poli/0 and a lo7er 6AJ%A ratio mean. an a re..i1e /urrent a..et. poli/0 a..umin other fa/tor. to be /on.tant& A /on.er1ati1e poli/0 i&e& hi her 6AJ%A ratio implie. reater liquidit0 and lo7er ri.8Q 7hile an a re..i1e poli/0 i&e& lo7er 6AJ%A ratio indi/ate. hi her ri.8 and poor liquidit0& The /urrent a..et. poli/0 of the mo.t firm. ma0 fall bet7een the.e t7o e5treme poli/ie.& The alternati1e /urrent a..et. poli/ie. ma0 be .ho7n 7ith the help of the follo7in fi ure&

In thi. fi ure the mo.t /on.er1ati1e poli/0 i. indi/ated b0 alternati1e A9 7here a. 6AJ%A ratio i. reate.t at e1er0 le1el of output& Alternati1e 6 i. the mo.t a re..i1e poli/09 a. 6AJ%A ratio i. lo7e.t at all le1el. of output& Alternati1e ( lie. bet7een the /on.er1ati1e and a re..i1e poli/ie. and i. an a1era e poli/0&

54

S/5%& &#%M '!*A*$!*


!ther than the in1e.tment in /urrent a..et.9 the firm al.o ha. to be /on/erned 7ith .hort2term to lon 2term debt a. thi. pla0. a 1er0 important role in determinin the amount of ri.8 underta8en b0 the firm& That i.9 the firm not onl0 ha. to be /on/erned about /urrent a..et. but al.o the .our/e. throu h 7hi/h the0 are finan/ed& A firm before finan/in in either of the t7o ha. to ta8e into /on.ideration 1ariou. a.pe/t.& :hile .hort term mi ht .eem the ideal 7a0 to finan/e 0our a..et. than the lon term due to .horter maturit0 period and al.o le.. of /o.t. are in1ol1ed9 there i. an inherent ri.8 in .hort term finan/in due to flu/tuatin intere.t rate. and due to the rea.on that the firm mi ht be unable to repa0 the amount in a .hort .pan of time&

S#$U%#" 05A*S S/5%& &#%M 05* &#%M &5&A0 KS/5%& &#%M

2012 )>;? , )>;? +,,

2011 ;??+&-> <),&,= <<-+&)< ?,&;

2010 *?,)&= , *?,)&= +,,

200< ;?>=&<);*+&)* >;;>&>> <?&,)

Under .e/ured loan /a.h /redit9 alon 7ith non fund ba.ed fa/ilitie.9 forei n /urren/0 term loan from ban8. are .e/ured b0 7a0 of h0pothe/ation of .to/82in2trade9 boo8 debt. a. fir.t /har e and b0 7a0 of .e/ond /hanr e on all the immo1able and mo1able a..et. of the parent /ompan0& Term loan in Indian rupee. from a ban8 i. .ub3e/t to a prior /har e in fa1our of /ompan0F. ban8er. on boo8 debt. and .to/8 in trade for 7or8in /apital fa/ilitie.&

U*S#$U%#" 05A*S S/5%& &#%M 05* &#%M &5&A0 K S/5%& &#%M

2012 +<+,; ++ +<++< ??&?)

2011 -<?)&)? += -*+,&)? ??&);>

2010 *)&?; +*?&<+ -))&;< -=&)>

200< =*&>; )-*+&;)))>&-* -&)

55

@ere @6L ha. a ma3or portion of their finan/in done throu h .hort term finan/in than lon term finan/in & The preferen/e of .hort term finan/in to lon term a. .u/h i. not the part of an0 poli/0 emplo0ed b0 the firm but it 7a. due to the rea.on that the intere.t rate. in .hort term 7ere more in1e.tor friendl0 and the /o.t in1ol1ed in them 7ere al.o lo7& At pre.ent9 7e /an .ee that the firm i. mo1in more to7ard. lon term finan/in a. the intere.t term. in the lon term ha. redu/ed /ompared to the .hort term&

A#A%- #*" $5MM#%$!A0 (A(#%S


(A%&!$U0A%S $5MM#%$!A0 (A(#%S 2012 ;,,, 2011 -<,, 2010 222 200< ),,,

The /redit ratin b0 I6RA /ontinued at PA1LFindi/atin hi he.t .afet0 to /ompan0F. /ommer/ial paper pro ram of R.& =< 6rore.& It a/t. a. an effe/ti1e tool in redu/in the intere.t /o.t and i. u.ed for finan/in in1entorie. and other re/ei1able.& A. and 7hen the firm i..ue. /ommer/ial paper.9 it .end. a letter to the leader of the /on.ortium9 i&e&9 S(I to redu/e from the fund ba.ed limit. the amount it ha. i..ued in the form of the /ommer/ial paper.& Suppo.e the firm i..ue. ), 6rore. a. /ommer/ial paper. and the fund ba.ed limit. are .a0 ++< 6rore.& Then firm .end. a letter to S(I to redu/e the e5i.tin fund ba.ed limit. from ++< to >< 6rore.&

In term. of de.irabilit09 the /ommer/ial paper. are /heaper and ad1anta eou. to the firm /ompared to the /on.ortium finan/in & The main ad1anta e bein the intere.t rate 7hi/h i. lo7er than the ban8 rate. e5i.tin under /on.ortium finan/in & (ut the firm depend. on both and for 7or8in /apital finan/in Q it i. dependent on the ban8. for fund. .u/h a. 7or8in /apital demand loan. and /a.h /redit.& There i. no point in the firm not ma8in u.e of the fund ba.ed limit. in the /on.ortium ban8in a. their commercia. 6a6ers are restricted to ;: $rores&

5#

$/A(&#%-: $5*$0U"!*

A*AAS!S

The 7or8in /apital po.ition of the /ompan0 i. .ound and the 1ariou. .our/e. throu h 7hi/h it i. funded are optimal&

The /ompan0 ha. u.ed it. di1idend poli/09 pur/ha.in 9 finan/in and in1e.tment de/i.ion. to ood effe/t /an be .een from the inferen/e. made earlier in the pro3e/t&

The debt. doubtful ha1e been doubled o1er the 0ear. but their per/enta e on the debt. ha. almo.t be/ome half& Thi. implie. a .ale. and /olle/tion poli/0 that et alon 7ith the re/ei1able. mana ement of the firm&

The return. ha1e been affe/ted b0 a mar8ed ro7th in 7or8in /apital and thou h a -?&=<G in -,++ return on in1e.tment i. ood9 but it ot redu/ed a. /ompared to )?&,+G return in -,+,&

The 1ariou. ratio. /al/ulated are an indi/ator a. to the fa/t that the profitabilit0 of the firm and .ale. are on a ri.e and al.o the deletion of the ineffi/ien/ie. in the 7or8in /apital mana ement&

The firm ha. not /ompromi.ed on profitabilit0 de.pite the hi h liquidit0 i. /ommendable&

@6L Info.0.tem. ha. rea/hed a po.ition 7here the default /o.t. are a. lo7 a. ne li ible and 7here the0 /an readil0 fa/tor their a//ount. re/ei1able. for a1ailin finan/e i. note7orth0&

57

0!M!&A&!5*S 5' &/# S&U"A


:e /annot do /ompari.on. 7ith other /ompanie. unle.. and until 7e ha1e the data of other /ompanie. on the .ame .ub3e/t& !nl0 the printed data about the /ompan0 7ill be a1ailable and not the ba/8Tend detail.& %uture plan. of the /ompan0 7ill not be di./lo.ed to u.& La.tl09 due to .horta e of time it i. not po..ible to /o1er all the fa/tor. and detail. re ardin the .ub3e/t of .tud0& The late.t finan/ial data /ould not be reported a. the /ompan0F. 7eb.ite. ha1e not been updated&

$/A(&#%-B
SU #S&!5*S A*" %#$5MM#*"A&!5*S

The mana ement of 7or8in /apital pla0. a 1ital role in runnin of a .u//e..ful bu.ine..& So9 thin . .hould o 7ith a proper under.tandin for mana in /a.h9 re/ei1able. and in1entor0& @6L Info.0.tem. i. mana in it. 7or8in /apital in a ood manner9 but .till there i. .ome ./ope for impro1ement in it. mana ement& Thi. /an help the /ompan0 in rai.in it. profit le1el b0 ma8in le.. in1e.tment in a//ount. re/ei1able. and .to/8. et/& Thi. 7ill ultimatel0 impro1e the effi/ien/0 of it. operation.& %ollo7in are fe7 re/ommendation. i1en to the /ompan0 in a/hie1in it. de.ired ob3e/ti1e.: The bu.ine.. run. .u//e..full0 7ith adequate amount of the 7or8in /apital but the /ompan0 .hould .ee to it that the /a.h .hould not be tied up in e5/e..i1e amount of 7or8in /apital& Thou h the pre.ent /olle/tion .0.tem i. near perfe/t9 the /ompan0 a. due to the in/rea.in .ale. .hould adopt more effe/ti1e mea.ure. .o a. to /ounter the threat of bad debt.& The o1er pur/ha.in fun/tion .hould be a1oided a. it /ould lead to liquidit0 problem.& The in1e.tment of /a.h in mar8etable .e/uritie. .hould be in/rea.ed9 a. it i. 1er0 profitable for the /ompan0&

59

@oldin of e5/e..i1e and in.uffi/ient .to/8 mu.t be a1oided a. it /reate. a burden on the /a.h re.our/e. of a bu.ine.. and re.ult. in lo.t .ale.9 dela0. for /u.tomer.9 et/ re.pe/ti1el0&

$/A(&#%-;
B!B0!5 %A(/A

%ollo7in .our/e. ha1e been .ou ht for the preparation of thi. report:
6orporate Intranet %inan/ial Statement. DAnnual Report.E "ire/t intera/tion 7ith the emplo0ee. of the /ompan0 Internet 2222777&h/linfo.0.tem.&in Te5tboo8. on finan/ial mana ement 2 I&M&Pande0 $han and #ain Pra.anna 6handra @6L TE6@N!L!'IES LIMITE"

#0

A((#*"!$#S

6!NS!LI"ATE" (ALAN6E S@EETS DThou.and. of US "ollar. e5/ept per .hare data and a. .tated other7i.eE

As of 2une 30= 2012 ASS#&S 2011

$urrent assets

6a.h and /a.h equi1alent.

L>>9,;?

L+,>9+<;

#1

Short term depo.it 7ith ban8. Re.tri/ted /a.h A//ount. re/ei1able.9 net of allo7an/e. Unbilled re1enue In1e.tment .e/uritie.9 a1ailable for .ale "ue from related partie. In1entorie. Emplo0ee re/ei1able. "eferred in/ome ta5e. !ther /urrent a..et. Total /urrent a..et. Emplo0ee re/ei1able. "eferred in/ome ta5e. In1e.tment .e/uritie.9 held to maturit0 In1e.tment. in affiliate. Propert0 and equipment9 net Intan ible a..et.9 net 'ood7ill !ther a..et. &ota. assets

=)9-?< *;< -*<9;;< ))9?)) )?*9*+, -9,,) ++9,=; ?9,,> -+9?;> +;*9-=< +9,;>9->< >=, =9*?, -9?;* -9)<* -<=9*,* >9,++ +>?9><= );9=)> M1=::2=3:<

+-<9<,< ?)* )*;9),) =-9??; ))<9<*; -9>+< +=9**> +)9?<> +)9)>; +<*9<-, +9-++9>,+ ),; =,9,-= -9=>> -9)<; ),?9;<) >9;=-+;9-;* ;=9)-) 1=>BB=;B>

/$0 &#$/*505 !#S 0!M!&#" $5*S50!"A&#" BA0A*$# S/##&S (&housands of US "o..ars e8ce6t 6er share data and as stated other-ise)

As of 2une 30=

#2

2012 0!AB!0!&!#S= M!*5%!&A !*&#%#S& A*" S&5$4/50"#%SN #HU!&A

2011

$urrent .iabi.ities

6urrent portion of /apital lea.e obli ation. A//ount. pa0able "ue to related partie. Short term loan. A//rued emplo0ee /o.t. "eferred re1enue "eferred in/ome ta5e. Ta5e. pa0able !ther /urrent liabilitie. &ota. current .iabi.ities Lon term debt 6apital lea.e obli ation.9 e5/ludin /urrent portion "eferred in/ome ta5e. !ther liabilitie. &ota. .iabi.ities $ommitments and $ontingencies (refer note 2B)

L-9,-? ->9-*; -9?;; >9*>+ )?9,+* --9+)) -9-,> =*9*++ +,;9-,= 2>B=0<3 2 >9+-) <; -)9<;; 31;=>1C

L-9)?) ;)9*,= +9;;* ;9?**)9?<) ;<9,=; +9-<< +->9+>= ---9)+> :13=1<: +9)?, ;9,;, )9-=+)+9+)> B:3=03:

Minority interest

3=:BB

1=313

Stoc,ho.dersF e?uity Equit0 .hare.9 =<,9,,,9,,, and =<,9,,,9,,, .hare. authori4ed

#3

I..ued and out.tandin **)9*>)9++* and ***9);,9-=Share. a. of #une ),9 -,,= and -,,> re.pe/ti1el0 Additional paid2in /apital Share appli/ation mone0 pendin allotment Retained earnin . A//umulated other /omprehen.i1e in/ome J Dlo..E &ota. stoc,ho.dersN e?uity &ota. .iabi.ities= minority interest and stoc,ho.dersN e?uity M1=::2=3:< M1=>BB=;B> ))9,)* <+*9;** 2 <>+9-,; +,,9-=) 1=230=<;< ))9+** <;>9,=)?= *>-9*-= D<+9>;-E 1=212=C20

The a//ompan0in note. are an inte ral part of the.e /on.olidated finan/ial .tatement.&

A*A0AS!S 5' $5*S50!"A&#" BA0A*$# S/##&


The /on.olidated balan/e .heet of @6L Info S0.tem .ho7. that in -,++ the total /urrent a..et. of the @6L Info S0.tem 7a. L+9,;>9->< and in -,+- it in/rea.e. to L+9-++9>,+ i&e& an in/rea.e of +<&,>G& Thi. /han e i. due to in/rea.e in /a.h and /a.h equi1alent.9 .hort term depo.it. 7ith ban89 a//ount. re/ei1able.9 unbilled re1enue.9 due from related partie.9 in1entorie.9 other /urrent a..et. and de/rea.e in in1e.tment .e/uritie. a1ailable for .ale & In -,,= the total a..et. 7a. L+9<<-9)<? and in -,,> it in/rea.e. to L+9>**9=*> i&e& there 7a. an in/rea.e of -,&-<G& Thi. /han e i. due to in/rea.e in deferred in/ome ta59 propert0 and equipment. net9 intan ible. a..et. net9 ood7ill and other a..et. and de/rea.e in emplo0ee re/ei1able.9 in1e.tment .e/uritie. held for maturit09 and in1e.tment in affiliate.& In -,++ the /urrent liabilitie. 7a. L->*9,?) and in -,+- it in/rea.e. to L<+)9+?< i&e& there 7a. an in/rea.e of =?+&;?G& Thi. /han e i. due to in/rea.e in a//ount. re/ei1able.9 a//rued emplo0ee /o.t.9 deferred re1enue9 ta5e. pa0able and other /urrent liabilitie. and de/rea.e in due to related partie.9 .hort term loan. and deferred in/ome ta5e.& In -,++ total liabilitie. 7a. L)+=9>+; and in -,+- it in/rea.e. to L*<)9,)< i&e& there 7a. an in/rea.e of +,<&;>G& Thi. /han e i. due to in/rea.e in lon term debt9 deferred in/ome ta5e. and other liabilitie. and de/rea.e in /apital lea.e obli ation& Al.o the minorit0 intere.t

#4

de/rea.e. from L)9<** to L+9)+)& The total .to/8holderF. equit0 de/rea.e. from L+9-),9?=? to L+9-+-9;-,&

/$0 &#$/*505 !#S 0!M!&#"


$5*S50!"A&#" S&A&#M#*&S 5' !*$5M# (&housands of US "o..ars e8ce6t 6er share data and as stated other-ise)

Aear ended 2une 30

2010 Re1enue. L?=*9,),

2011 L+9)>?9<==

2012 L+9>=>9>*<

6o.t of re1enue. De5/lu.i1e of depre/iation and amorti4ation .ho7n .eparatel0 belo7E Sellin 9 eneral and admini.trati1e e5pen.e.

*--9?+<

>=;9?+<

+9+*)9+;;

+<+9>)=

-),9-*<

)-)9<=)

#5

"epre/iation and amorti4ation !ncome from o6erations !ther in/ome9 net !ncome before income ta8es= share of e?uity in #arnings of affi.iates and minority interest In/ome ta5e. !ncome before share of e?uity in earnings of affi.iates and minority interest Equit0 in earnin .JDlo..e.E of affiliate. Minorit0 intere.t *et income

;-9*-; 1:>=B:C D*;<E 1:>=00<

<>9)+* 22B=0>1 +,+9>=, 32;=<:1

=;9*+31;=:3B D-?9)-)E 2>>=213

+)9;,)

)-9?)?

-?9;<)

1CC=B0B D+)?E D)<-E M1CC=11:

2<:=012 D--?E D+9-*)E M2<3=:20

2:>=;B0 +), D*;=E M2:>=2C3

#arnings 6er e?uity share (a.i/ "iluted L,&-L,&-+ L,&;< L,&;) L,&)? L,&)>

@eighted a7erage number of e?uity shares used in com6uting earnings 6er e?uity share (a.i/ "iluted *;-9=>>9?*, *>;9)++9=+; *<-9*-*9=>- **;9;-;9)), *=<9-?,9)>> *>-9=;>9<?*

##

The a//ompan0in note. are an inte ral part of the.e /on.olidated finan/ial .tatement.&

A*A0AS!S 5' $5*S50!"A&#" S&A&#M#*& 5' !*$5*#


The /omparati1e in/ome .tatement of @6L Info S0.tem .ho7. that in -,++ the in/ome from operation 7a. L--*9,>+ and in -,+- it i. in/rea.ed to L)+=9<)* i&e& there i. an in/rea.e of ;,&;<G& %urther the in/ome before in/ome ta5 and in/ome after in/ome ta5 de/rea.e. b0 L++;9=)> and L)*9-<- re.pe/ti1el0 i&e& D+-&+-GE and D+-&-?GE de/rea.e re.pe/ti1el0& The net in/ome 7ere in/rea.ed b0 L)<9-== i&e& +-&,-G de/rea.e in net in/ome& The re.ult of thi. 7a. a de/rea.e in EPS from &>> to &== Din /orer.E&

#7